Lower Cattle Placements – Snugger Supply

“The short supply of feeder cattle, masked by the impacts of two years of drought, is finally catching up with us,” says Derrell Peel, Oklahoma State University Extension livestock marketing specialist, in his weekly livestock marketing comments.

Peel is referencing Friday’s monthly Cattle on Feed report, which indicated fewer cattle were placed in feedlots during August than most anticipated.

August placements (2.0 million head) were 11% less than a year earlier and the second lowest August placement since the National Agricultural Statistics Service began the data series in 1996. Heading into the report, the average estimate was for placements to be 7.3% lower; the bottom end of the range was 11.8% lower. That was according to Steve Meyer and Len Steiner in the CME Group Daily Livestock Report.

Marketings in August of 1.96 million head were 5% less than a year earlier. The average estimate was for marketings to be 1.5% less; the bottom end of the range was 2.7% less.

Heading into the report, analysts thought total cattle on feed on Sept. 1 would be about even with a year earlier, but at 10.6 million head, it’s 1% less. Peel notes this is only the second time in 28 months that feedlot inventories have been less than year-earlier levels on a month-to-month basis.

James Robb, director of the Livestock Marketing Information Center (LMIC), explained last week, “In most years, August marks the beginning of a ramp-up in cattle entering feedlots with October being the peak month. In the five-year period from 2006 through 2010, monthly placements in the first seven months of the year tended to be below average and August was 13% above the average. In September and October, placements were 23% and 31% over the annual average, respectively. Last year, because of the Southern Plains drought, feedlot placements jumped above average one month earlier than normal in July. Still, even during last year’s drought, placements generally followed the normal season, including peaking in October.”

According to Peel, calf imports from Mexico are the primary reason feedlots have been able to maintain such high inventory levels. Those imports were atypically heavy because of the drought in that nation. But, Peel says imports from south of the border are likely to decrease as drought conditions improve in Mexico.

“So, will feedlots be able to maintain inventories in the coming months?” Peel asks. “The answer is no. Feedlots have not placed the large numbers of lightweight cattle that will stay on feed for many months like they did last year. While lightweight placements will increase seasonally the next couple of months, the weight distribution in feedlots suggests that feedlot inventories will pull below year-earlier levels and stay below for many months. Additionally, feeder cattle imports will drop, if not immediately, certainly in the next few months, contributing to the inability of feedlots to maintain feedlot inventories. Finally, in the absence of drought in 2013, increased heifer retention combined with a still smaller calf crop will further reduce feeder supplies.”